For the next (5) five questions: On September 1, 2022, when the prevailing market rate on similar instruments was at 5%, DEF Corporation acquired P5,000,000 bonds of Y Company. The bonds will be accounted as a financial asset at fair value through other comprehensive income. The bonds pay interest of 6% every March 1 and September 1 and will mature on September 1, 2027. The fair value of the bonds (dirty price) at year-end are presented below: December 31, 2022 December 31, 2023 December 31, 2024 December 31, 2025 December 31, 2026 107 105 103 104 101 5. What is the total interest income to be recognized on the investment in bonds in 2023? 6. What is the amount of adjustment to the Unrealized Gain or Loss – OCI account to update the fair value of the investment on December 31, 2023? (Indicate if debit or credit) 7. Prepare the journal entry to record the receipt of interest on March 1, 2024. 8. What is the carrying value of the investment in bonds on December 31, 2024? 9. Bonds with face value of P2,000,000 were sold at fair value on December 31, 2025. After updating the related investment's fair value, what is the balance of Unrealized Gain or Loss – OCI to be “recycled" to the income statement in 2025? (Indicate if debit or credit)
For the next (5) five questions: On September 1, 2022, when the prevailing market rate on similar instruments was at 5%, DEF Corporation acquired P5,000,000 bonds of Y Company. The bonds will be accounted as a financial asset at fair value through other comprehensive income. The bonds pay interest of 6% every March 1 and September 1 and will mature on September 1, 2027. The fair value of the bonds (dirty price) at year-end are presented below: December 31, 2022 December 31, 2023 December 31, 2024 December 31, 2025 December 31, 2026 107 105 103 104 101 5. What is the total interest income to be recognized on the investment in bonds in 2023? 6. What is the amount of adjustment to the Unrealized Gain or Loss – OCI account to update the fair value of the investment on December 31, 2023? (Indicate if debit or credit) 7. Prepare the journal entry to record the receipt of interest on March 1, 2024. 8. What is the carrying value of the investment in bonds on December 31, 2024? 9. Bonds with face value of P2,000,000 were sold at fair value on December 31, 2025. After updating the related investment's fair value, what is the balance of Unrealized Gain or Loss – OCI to be “recycled" to the income statement in 2025? (Indicate if debit or credit)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:For the next (5) five questions:
On September 1, 2022, when the prevailing market rate on similar instruments was at 5%, DEF
Corporation acquired P5,000,000 bonds of Y Company. The bonds will be accounted as a financial asset
at fair value through other comprehensive income. The bonds pay interest of 6% every March 1 and
September 1 and will mature on September 1, 2027. The fair value of the bonds (dirty price) at year-end
are presented below:
December 31, 2022
December 31, 2023
December 31, 2024
December 31, 2025
December 31, 2026
107
105
103
104
101
5. What is the total interest income to be recognized on the investment in bonds in 2023?
6. What is the amount of adjustment to the Unrealized Gain or Loss – OCI account to update the fair value
of the investment on December 31, 2023? (Indicate if debit or credit)
7. Prepare the journal entry to record the receipt of interest on March 1, 2024.
8. What is the carrying value of the investment in bonds on December 31, 2024?
9. Bonds with face value of P2,000,000 were sold at fair value on December 31, 2025. After updating the
related investment's fair value, what is the balance of Unrealized Gain or Loss – OCI to be “recycled" to
the income statement in 2025? (Indicate if debit or credit)
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